中国食品(00506) 　　What's new 　　China foods announced a deal with KO and Swire to acquire 8 ofKO’s refranchised bottling plants in China and 1 more plant fromSwire (but it sold its 3 bottling plants with controlling stakes and4 JV plants back to Swire at same time �C Swire also bought 4 ofKO’s refranchised plants). After the deal, KO’s bottling businessin China will be fully under COFCO and Swire under a split of49% vs. 51% based on 2015 revenue. 　　Comments 　　Moving closer to a pure beverage play: On its websiteCOFCO separates alcoholic drinks and beverages into twoindependent BUs out of total 18, which hints at China Foods’ pickof wine or beverage as its solely retained business at last.Valuation suggests growth potential and does notcontain latest launch of Monster energy drinks.We still use a NAV approach to identify valueenhancement from restructuring.See page 3 for details 　　Valuation and recommendation 　　Since the deal will take time to finalize, we expect the financialimpact to kick in from FY17 and thus keep our FY16sales/earnings forecast largely intact while reflecting the deal’simpact onward from our FY17 forecast. We raise our FY17eearnings 21.2% and keep our forecasts on the wine andkitchen food units unchanged until we gain a clearer sense of thetiming and pricing of disposing both. We roll over our TP toend-FY17 since end-FY16 approaches. Our new TP of HK$6.04(from HK$6.50) is also DCF-derived. We cut our TP due tounidentified asset disposal gains that may causeunderestimation of existing FY17 earnings forecast.Maintain Conviction BUY and expect restructuring to bringvalue to the investors. Risks: organic recovery and businessrestructuring both slow.